Written By: - Date published: 1:32 am, October 9th, 2008 - 56 comments
Categories: election 2008, john key, kiwisaver, national, slippery -
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That was going to be the title of my first post on National’s tax-cut plan but then it turned out National’s plan would actually make about 1 million taxpayers worse off compared to Labour’s cuts (all figures derived from the Budget and National’s tax policy). That 1 million comprises approx 650,000, including nearly all super-annuitants, on incomes between $14,000 and $24,000 and approx 350,000 on incomes between $24,000 and $44,000 who get Working for Families, Super, or a benefit. They would miss out on Labour’s threshold rises and National’s Independent Earner Rebate. Someone living on a trust or investment income does count as an Independent Earner for National.
Leaving aside, for now, the 1 million Kiwis and their families National would make poorer (and the 1.1 million on less than $14K who get the same amount from both parties), let’s look at what those who do get something get. If you are one of the 400,000 who earn between $24K and $50K and work or live off investment or trust income, and you remember to apply for the rebate, you would pay $7-$14 a week less tax by 2011 with National. Then there’s the 700,000 on high incomes, $50K to $100K. In this range, you’d pay $6-$14 less a week. After that, the sky is the limit: the 50,000 on $150K plus get at least $33 a week, at quarter of a million, you’re pocketing $72 a week. If you’re one of the thousand or fewer with an income over a million a year, you would get $360 and more a week from National.
It’s all small change at every level. The 1.1 million who would get an additional tax cut from National would see their after-tax incomes increase by 1-2% (the 600,000 on $14-24K would see theirs fall 1-3%). Nearly all of them would get $14 or less more than they would from Labour. About 300,000 of them would have to offset that against lost Kiwisaver contributions of $20 plus a week.
Fewer than a quarter of taxpayers would get a net benefit from National’s cuts, with nearly all of the money going to the small number on more than $80K. Everyone else either gets nothing, gets less, or loses more in Kiwisaver contributions.
Key promised his tax cuts would lift the economy, close the wage gap, lower emigration, lift productivity, prevent doctors’ strikes… The idea that these cuts would lead to any of those promises being fulfilled is, of course, laughable. Key has had his big shot and he blew it. Now we know that, for all his hype, Key can only deliver small change.
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Steve,
Even people who eventually end up on the same level when Labour’s tax plan finally rolls out will still be considerably better off.
For instance, people who end up $20 better off under both schemes will be better off under national because the money comes through a year earlier. This means they have a full year of getting the tax cut. So, at $20 per week, they will be $1000 better off under National, even if the rates end up the same. Then, take into account the NPV of money and it is better again. Plus, the fact that the money is feeding back into the economy for a full year right when the economy needs it.
I think you are deliberately ignoring this fact.
Also, analysis I have seen on TV shows that superannuitants will be better off under the National scheme than they are under Labour now, despite your claim to the contrary.
I notice our great and noble leader has just blown 40 mil on nationalising some land that is of no benefit whatsoever other than to be walked through. This is from a government that is claiming responsibility with our money at a time when the accounts are bleeding terribly.
How can you defend this?
[One year with $7 more a week or whatever is nothing in the long-term, or in NPV terms. On-onw earning less than $120K a year gets $20 a week more under National. I don't know how superannuitants can be better off - everyone between 14K and 24K would be worse off with National, you show me how they would be better off. SP]
Helen Clark mentioned the weekly losses people would get from not geting the 4% employer Kiwisaver contribution would be about $40 on the average wage.
But as I earn way below the average wage I am more concerned about the country having good infrastructure such as public transport, schools, power lines etc (as well as good public services of course).
Labour has done a huge amount in infrastructure – schools, roads, trains etc over the last 9 years. And National was theoretically promising to do even more. But I see from the Dom Post that National has now gone back on that promise, to pay for the tax cuts.
So no new infrastructure, no R & D, attacks on Kiwisaver – no vision there. Why would anyone vote for this?
(Captcha: limit back)
Janet said: “So no new infrastructure, no R & D, attacks on Kiwisaver – no vision there. Why would anyone vote for this?”
Because Labour has gone and run the cupboard bare so there is no money for these things, Janet. Would you spend up large on modifying your house if you just found out you were about to be made redundant? Quite simple really.
The Kiwi saver changes actually make it easier for people to join, which is a good thing. This does not stop people from contributing at their current rate if they want to. Also, probably 95% of businesses would not be interested in the R & D grant anyway. Go and ask your local shop keeper or panelbeater. Most of the few businesses that have been claiming it have been using it as a rort anyway. So, it is no great loss.
I see 08wire estimates someone like John Key will be about $3000 a week better off in tax cuts under this deal, and it will be making our top tax rate even lower internationally.
I notice our great and noble leader has just blown 40 mil on nationalising some land that is of no benefit whatsoever other than to be walked through.
I suppose you could characterise almost ALL of our National Parks and conservation estate as “only good for walking through” … but you and I both know that would be a pretty dishonest spin to put on it. Our parks are in fact a hugely valuable asset; in every sense of the word.
The opportunity to purchase this kind of magnificent high country land only happens rarely (the St James has been in the Stevenson family for 80 plus years) so the govt either acted now to retain this land in NZ ownership or perhaps miss out for another generation.
St James is not just any old farm; FMC has been campaigning for the public ownership of this area for more than 30 years, which is an indication of how valuable and strategic this acquisition has been for all New Zealanders.
Interesting how in what miniscule coverage of the National tax policy the Herald has, all criticism comes from National’s [nasty negative petty] opponents, while all of Key’s statements are presented in an overall positive tone.
sprout, Ducan Garner was in fine editorialising form last night as well. Telling viewers that the package was difficult to criticise and not bothering to ask around and see if there were any people out there that had criticisms.
But that would be journalsim I guess. Too hard.
Sprout, that’s not entirely correct. The Herald website yesterday led with the headline that lower income earners would be worse off under National, which is hardly a glowing endorsement.
Janet
“Why would anyone vote for this?”
They’d vote for ‘this’ by default. The ‘right’ are, in my opinion’ correct when they assert that people are fed up with Labour. I suspect many will vote for Nat out of protest unless it becomes apparent to them just how bad things will be for them under Nat. At the moment, it might be argued that the Nats are still successfully pulling the wool over the eyes of enough people.
I think it’s unfortunate that voters persist with a FPP mentality under the MMP system. It’s taken as read that either Nat or Lab will be the mainstay of government…that their policies will dominate.
Insofar as that is true, the choice would appear to be a right leaning Labour government; a more right leaning Nat government; or a Lab led government pushed left by coalition partners.
But on the third choice, other parties are not getting enough coverage to be perceived as having more than a minor effect on a future government….a so-called ‘kingmaker’ role that decides who between Nat and Lab will govern.
I’d love to see the profile of the so-called minor parties rise significantly to the extent that it became a commonly held view that a party vote for them would have a significant impact on future policies; to see the self fulfilling myth that since they are ‘minor’ they can only have a minor influence – and the subsequent relegating of them in peoples minds in terms of importance and voting – blown away.
Until that happens, NZ is destined to have a government on the right of the political spectrum. Sadly.
Sprout :Interesting how in what miniscule coverage of the National tax policy the Herald has, all criticism comes from National’s [nasty negative petty] opponents, while all of Key’s statements are presented in an overall positive tone.
You’ve just confirmed HCs claim that its a tory newsletter hahaha
Key has done what the previous National Leader who he admired (Rob Muldoon) did – stuffed a good superannuation scheme!
All he has tried to achieve with his tinkering is get a tax cut bigger than Labour’s – but why not try something more interesting, like indexing the tax bands to inflation. He has also managed to alienate more business people i.e. anyone doing R&D in NZ.
Janet’s right. I make very little money every year. I don’t care about tax cuts, I don’t notice what I do get taxed. I take what I get paid after tax at face value, and am happy to live in a decent country.
Isn’t the aim of a government to improve a country? All I see National doing is taking things apart. John Key talks of improving the country:
…yet we pay a miniscule amount of tax compared the the actual best countries in the world (namely, most of Scandinavia), who benefit from free education, healthcare, and all the usual socialist trappings. They also have the lowest poverty rates in Europe.
Who would want to move away from, rather than towards a system like that?
hmm yes ‘difficult to criticise’ could well become Duncan’s new killer catchphrase…
“Yes hillary it’s difficult to criticise National’s policy… because I don’t read good…”
“Yes hillary it’s difficult to criticise National’s policy… because nobody will tell me what to say…”
“Yes hillary it’s difficult to criticise National’s policy… because I can’t count numbers and stuff…”
GT
yes true in the interests of appearing even-handed there have been some Herald originated criticisms, but they’re downplayed and always carefully ‘balanced’ with other glowing reports… the final balance will come out net positive.
and of course the angle that National’s One Major Policy Distinction has turned out to be a wet fart won’t even get a look in. Does anyone remember how National’s total popularity platform for the last three years, other than ‘we’re not Labour’, has been tax cuts tax cuts tax cuts?
I see Bernard Hickey thinks the economic crisis is going to get a lot worse yet. So I wouldn’t be surprised if this tax announcement got cut back. All we are sure about is that it was the policy for 8 October 2008, but who knows what the policy will be by 8 November 2008?
Labour should repeal the tax cuts altogether. That’d shift the agenda a bit
Who in their right mind would reduce R&D spending in order to fund tax cuts? Way to think short-term there, John.
God damnit National, why won’t you let us love you?
Two people I work with who are both fence sitters are now lost to National – it was the mucking about with Kiwisaver that has done it for them. These aren’t people who follow the news closely or debate in blogs like this but ordinary voters who’ve looked at National’s plan and gone – no.
Interested to see how right wing the polls on the Herald are again…maybe they have rooms of trained monkeys voting dozens of times…
sprout Labour should repeal the tax cuts altogether. That’d shift the agenda a bit
It shouulod restart them the same day that the nats would start there first tax cut thereby negatating nation using 1 Oct 08 as part of there tax package. lol
nation = national
Sprout
While I’m sure you have your tongue well and truly in your cheek it’s a shame that a recession hits hard during this part of the election cycle – I would have expected that we might have had a better response to the situation from all sides if there was no electioneering going on at present.
dom
i think it’s as much that the left now starting to understand why there’s no point participating in online polls – it just contributes to a veneer of validity. in many ways the best thing to do to counter their function of steering debate is to let them wind off into blatantly cuckoo rightwing imbalances in what they ‘reveal’.
but now National’s Chewing Gum tax cuts have been revealed, to little surprise, let’s go back to the altogether more fruitful Pita and John Show: Who is Lying about the Maori seats.
Someone is lying, I’d like to know who?
For those on low incomes with a family and claiming WFF – I was under the impression that they paid close to zero tax at present (I seem to remember Tane commenting on this a few times and it sounded correct) is that due to change under National ?
Perhaps the most useful thing the mainstream media could do, or the unions or whomever would be to release non biased figures as to the effect of each of the two parties tax packages for different scenarios – I expect I’m living in a fantasy land however and we’ll get biased cak all round.
true HS, we’ll have to rely on the more professional sources like the Standard for actual fact-based analsyes.
all them numbers and stuff, you can’t expect people like Duncan Garner to bother themselves with that, it’s far too hard to work excel.
I think we’ll only get the analysis of the tax package in the debates – Key has to rely and that and their law and order policy to differentiate his party from Labour – and he will be soundly slammed on both fronts.
Don’t worry about Labours Tax Cuts or National Tax cuts the merritt or lack of merit of either.
[deleted]
[lprent: I'm tired of reading your badly written, badly spelt, and non-interactive propaganda. Leaving you in moderation doesn't to have appeared to made you learn. Putting you in any alias on the permanent ban list. Face it you are just not up to the minimum standard and you just clog the comments section with no redeeming features.]
Sprout I think you misread my comment – I said non-biased.
I don’t think SP would ever claim he was non-biased.
If you read three or four blogs you’ll get different views dependent on the political flavour of the person posting…….. but I’m sure you know that.
i hear you HS, but biased doesn’t necessarily imply inaccurate.
Dom
“I think we’ll only get the analysis of the tax package in the debate”
In that case we’ll get little to no analysis – I expect the debates between Clark and Key will consist of repeated messages, screeching at each other, an audience who are separated into blue and red seats and jeer and cheer their respective hero and villian and a mediator who’ll think the debate is all about them and their clever interjections.
Feck how depressing.
apparently the audience has been chosen to be non-partisan or ambivalent, and the jeering matches of last election’s farce debates is to be avoided this time around.
but you’re right HS, we still won’t get bugger all analysis. and while it’ll ostensibly be about The Economy, it’ll really be about personality and plausibility. a fairly even match on the first count, less so on the second.
Perhaps they could introduce electric buzzers and when a large enough proportion of the audience get annoyed with the speakers they can give them a small electric shock.
If the audience is truly non-partisan I’d expect most of them to become perturbed with both Clark and Key within a very shore time period and could show their displeasure by making them both twitch uncontrollably – even if the debates aren’t informative at least it would then be a bit entertaining
admittedly that would be quite good, and it would showcase each contestant’s ability to handle shocks
I’ve no time to chat today, but the excellent Gordon Campbell’s piece on National’s “plans” should be required reading.
What has irked me most about the reporting is that this was presented as Key’s economic transformation package, not just about tax cuts.
The transformation bit seems to be transforming us into a low-savings, low-research economy, with the R & D and KS cuts.
Yet the media has forgotten all about that bit, and focused by and large on tax cuts.
Understandable they’ve forgotten about the underclass Key has just ignored, that speech was over a year ago – but ‘economic transformation package’ was three friggin’ days ago – will someone hold the man to his bleedin’ words?!
Feck how depressing indeed.
I won’t start with Watkins’ “They probably are good enough” – why not analyse it so we can decide ourselves instead of telling us! That was a pathetic piece if ever I saw one.
yeah the whole R&D thing is mystifying – all I can think of is that the farming wing of National is in ascendence again?
I run a small company – heavily in the R&D phase at the moment – it’s left me seriously thinking about where I should be doing this, it’s warmer in Oz, closer to my customers in the US – there are lots of downsides to doing R&D in NZ (long supply chains are #1 – 3 days for components by fedex thru customs is just silly) – the main upside is that the overhead of running a small company is wonderfully simple and cheap in NZ (people bitch about ‘compliance costs’ they’ve just never tried to run a company somewhere else) – after the recent changes everyone had some form of R&D credit so it wasn’t an issue – now it’s a minus
Whatever happens changes that happen this fast are really bad – one needs to be able to plan ahead – want to take away the R&D credit – go ahead – but give us 2 years warning so we can make plans
No matter what you say the unescapable truth about all this is that it’s a cynical, short sighted ploy on National’s part for votes.